Ward Off Killer Fees and Demonic Credit Card Curses

Are there fang marks on your wallet? If you haven't noticed those small puncture wounds left by your credit card company, take heed -- those pinpricks are filled with poison. [Cue scary organ music.]

Every year, lenders' profit-padding bite becomes more venomous as they extract billions of dollars in late fees, over-limit fees, inactivity fees, maintenance fees, and more from cardholders.

According to Consumer Reports, card companies have snatched up a 150% penalty fee income increase since 1998. In fact, Americans spend more on late fees than we do on milk and eggs every year. [Cue another pipe organ interlude.] It's enough to drain the blood from your entire body.

Attack of the killer fees

So where exactly are these killer fees lurking?

Late payments potions: According to the 2007 Credit Card Survey by Consumer-Action.org, the average late payment fee has more than doubled since 1995, to $28 from $13 -- though some credit card companies charge tardy customers even more.

Over-limit ghouls: Got a little carried away at the mall and went over your credit limit? Over-limit fees seem to march in lock step with late-payment penalties and can run you more than $30 a month until you right your over-spending wrong.

Penalty interest rate wraiths: Missteps like the two above often trigger yet another gruesome punishment -- a penalty interest rate. And banks are out for blood.  According to the Consumer Action survey, 85% of card companies issue penalty rates. Like a shot of adrenaline, rates can shoot up to 33% or more in a heartbeat. Compared to the average interest rate cardholders pay -- around 14% -- it can quickly turn into a stint in debtor's dungeon. 

Universal default demons: If any of your credit cards are haunted by the "universal default" demon, companies will attach a ball and chain to your interest rate -- even if you've always been a model customer. This clause allows issuers to legally raise your interest rate if they catch wind of bad behavior anywhere in your credit file.

Debt rising from the dead: Got any ghosts of unpaid bills past? Lenders just love to clear the cobwebs from charged-off accounts and sell old, unpaid debts to collection companies. These so-called "zombie debts" spawn calls from collectors demanding payment from formerly flatlined debts. Before you admit to anything, check your records (you can order your credit report for free at annualcreditreport.com), face the beast (the original lender) yourself, and stop the zombie debt from stalking you for eternity.

Four ways to ward off credit card evils

If you've managed to ward off these gremlin fees so far, don't let your guard down too fast.

Double-check the locks every month: Don't blindly discard that account update leaflet included with your statement. Carefully read the fine print on your cardmember agreement. With each bill, look out for activation fees, annual fees, balance transfer fees, credit insurance and ID theft protection fees, and account inactivity fees. Also watch out for shrinking grace periods, changing due dates and billing addresses, and pesky fees for conveniences like using your credit card while traveling abroad.

Pay on time, every time: The easiest way to avoid rattling the cage is to pay your bills on time. Punctuality is an innocent cardholder's best defense. It's like a bucket of water to a witch -- it withers a lender's penalty-wielding power. If a due date completely skips your mind, call your credit card company ASAP and let them know the check's in the mail. If you have to pay your bill the same day by phone, prepare to cough up $15 or more. Writing due dates on your calendar is a much cheaper way to go.

Call your lender and beg for absolution: A flub here and there needn't lead to a few months (or years) in the cardholder stockade. If you aren't a frequent offender (meaning no 30-, 60-, or 90-day late payments in the past nine to 12 months), ask the man behind the 1-800 customer service curtain to forgive a one-time gaffe (and a late payment or over-limit fee).

Snag a better credit card deal: As long as you're on the phone with customer service, see if you can improve your relationship. Ask for a lower interest rate: Studies show that more than half the people who call their credit card customer service departments are successful in reducing their annual interest rates by an average of one-third. (And, as we've illustrated before in this column, one phone call can save you more than $700 clams.) Don't like that shorter grace period -- or want to change your due date? Just ask. Your lender would rather keep you as a customer than shell out $50 to $150 to find a new one.

A jester cap is everyday attire at The Motley Fool, which makes last-minute Halloween invitations and bad-hair days no problemo for Fool columnist and GreenLight.Fool.com advisor Dayana Yochim.